German Chancellor Angela Merkel on Wednesday laid out proposals to gain control over “destructive” financial markets after she imposed a unilateral ban on naked short selling and speculation on European government bonds with credit-default swaps.
Ms. Merkel, opening a parliamentary debate on Germany’s contribution to a $1 trillion bailout to backstop the euro, said faster budget cuts, tougher penalties for countries that flout the rules and the orderly insolvency of euro-region states are among the measures Germany will put to European Union partners on Friday.
“The lack of rules and limits can make behavior in financial markets driven purely by the profit motive destructive and lead to an existential threat to financial stability in Europe and even the world,” Ms. Merkel told lawmakers in Berlin on Wednesday. “The market alone won’t correct these mistakes.”
Ms. Merkel said the ban “will stay in effect until another solution has been found at the European level.” She also said Germany will act alone where necessary.